On January 1, 2012, the Lovell Company budget committee has reached agreement on the following data for
Question:
On January 1, 2012, the Lovell Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2012.
Sales units:First quarter 5,000; second quarter 6,000; third quarter 7,000
Ending raw materials inventory: 50% of the next quarter’s production requirements
Ending finished goods inventory: 30% of the next quarter’s expected sales units
Third-quarter production: 7,250 units
The ending raw materials and finished goods inventories at December 31, 2011, follow the same percentage relationships to production and sales that occur in 2012. Three pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound.
Instructions
(a) Prepare a production budget by quarters for the 6-month period ended June 30, 2012.
(b) Prepare a direct materials budget by quarters for the 6-month period ended June 30, 2012.
Step by Step Answer:
Managerial Accounting Tools for business decision making
ISBN: 978-0470477144
5th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso